New legal obligation for energy users - this may apply to you next year

The Carbon Reduction Commitment (CRC) is a new carbon emissions trading scheme that will affect large organisations in the UK. This forms part of the Climate Change Bill that was introduced into Parliament on 14 November 2007 and became law on 26th November 2008. If your electricity bills exceed £500,000 you will have to comply. Even if your bill is lower than this, you may still be required to register.

The scheme is a central part of the UK's strategy for controlling carbon dioxide (CO2) emissions. It will tackle CO2 emissions not already covered by Climate Change Agreements and the EU Emissions Trading System. This will help reduce the country's carbon footprint to deliver the ambitious emissions reduction targets set in the Government's Climate Change Act. The scheme will start in April 2010, although it is based on 2008 energy consumption.

Around 20,000 organisations may be affected by the scheme and yours could be one of them. Failure to comply with your obligations will result in penalties including monetary fines.
Although suppliers will be sending letters to all their qualifying customers this month (you may have already received one), it will be your responsibility to respond and manage your carbon emissions, not your supplier.

As with any trading scheme there will be winners and losers and the additional costs could be substantial. The scheme is managed by the Environment Agency.

Qualification

Qualification for the CRC is based on half-hourly electricity consumption and your organisation will qualify if, during 2008, you had:

• at least one half-hourly meter settled on the half-hourly market across your whole organisation, including:
  • Mandatory Half Hourly Meters (HHMs)
  • Voluntary HHMs
  • Half-hourly light meters
  • Pseudo HHMs
  • All remotely read AMR meters producing HH data
• electricity consumption through all HHMs of at least 6,000MWh

Information disclosure
Even if your consumption during 2008 was less than 6,000MWh, you will still need to provide information under the CRC.  If your consumption was more than 3,000MWh, you will be required to declare, during the registration period (April - September 2010), all your settled HHM reference numbers as well as your electricity consumption through all HHMs. 

Implications for energy users

High energy users will soon need to provide detailed information about their energy consumption and emissions under the CRC. Those best placed to forecast and manage their consumption and source renewable energy could be in a position to sell CO2 credits; those failing to do so will be forced to buy CO2 credits on a market that could be volatile, leading to significant costs.

CRC Timetable
Although scheme registration does not commence until April 2010, qualification is based on 2008 energy consumption and Qualification Packs will be issued in September 2009.  All potential participants must therefore consider their CRC position now, and prepare for CRC launch.